Does Samsung deal leave CSR out in the cold?

NEW YORK -- The recently announced CSR-Samsung deal, under which Samsung Electronics will acquire CSR’s handset connectivity/location development operations and its technology, was an easy sell to the financial community. Everyone loved it.

After all, the British chip company, which originally made its name in Bluetooth chips, was losing ground in smartphones to bigger rivals who were combining more functions in a single platform. Offloading struggling business units to a lucrative buyer is a business practice highly valued on Wall Street.

But then, what’s left of CSR -- with no connectivity and location technologies at its core?

Fine print in the agreement

A closer look at the two companies’ agreement reveals a few bullet points that the casual observer might have overlooked.

-CSR’s indoor GPS technology will not go to Samsung. Its development team will stay with CSR; and its technology is neither up for sale nor available for licensing.

-CSR, in fact, has high hopes to sell its indoor GPS chips as a standalone product – lots of them – to mobile handset vendors.

-CSR isn’t entirely giving up Bluetooth. It will focus on Bluetooth low-energy technology.

-CSR is not allowed to sell connectivity products (Bluetooth, WiFi) into the handset/mobile field; but the same rule doesn’t apply to its location technology. CSR is “generally unrestricted” regarding commercialization of location technology (GPS) into any field.

-CSR, however, is not restriction-free for many ventures the company might contemplate in the future. The fine print in the agreement prevents CSR from selling location products combined with an apps processor in the handheld/mobile field (10 years), or granting any of its location technology rights to an apps processor company (two years).

Not bowing out

In a nutshell, CSR isn’t entirely bowing out of either location or connectivity businesses. Nor is it walking away from the mobile market. (CSR will sell indoor GPS chips to mobile handset vendors; CSR’s aptX audio codec has been adopted by Samsung’s latest smartphone to deliver CD-quality stereo over Bluetooth wireless connectivity.)

The British company has apparently managed to keep what they view as differentiated parts of its connectivity/location technologies, while unloading increasingly the commoditized WiFi, Bluetooth and GPS technologies that are now getting integrated in mobile apps processors or baseband chips.

Well, that’s the theory. But drilling down into the agreement, decipher what CSR can and cannot do for for certain periods of time in various scenarios, and the deal seems pretty complex. Has CSR put itself into a straightjacket?

The Samsung-CSR agreement is about putting some of CSR’s connectivity and location assets in the hands of Samsung Electronics. Samsung’s semiconductor division “has been very interested in leveraging our proven technology,” explained Van Beurden. These assets around the smartphone “will be more valuable to Samsung” which dominates the global mobile apps processor market today, he added.

Obviously, all the seemingly complex restrictions in the agreement are there to protect Samsung’s semiconductor business. (And that of CSR’s, too). It won’t make sense for CSR to start doing business with Samsung’s competitors while granting to Samsung a world-wide perpetual, royalty-free, non-exclusive license of CSR’s IP rights in its connectivity and location products.

However, various restrictions imposed on CSR illustrate a number of possible, but not clearcut opportunities for connectivity and location chips in the future.

Five "high growth" markets?

Asked what constitutes CSR after the Samsung deal is complete in the fourth quarter this year, Van Beurden said that CSR is focusing on the five “high growth” areas: Bluetooth Smart; Indoor GPS; imaging (which came out of Zoran acquisition); voice & music; and automotive infotainment. CSR claims that the company holds the number one position on markets for voice &music, imaging and Bluetooth Smart. It’s ranked second in automotive infotainment.

In contrast, Bluetooth Smart is still a new market; and indoor location is a market that has yet to generate actual revenue. How long CSR can sustain itself on the bleeding edge of emerging markets, especially for indoor location, is the make-or-break question.

CSR, however, is most likely to do well in the emerging Bluetooth Smart devices market. These devices are essentially enabled by Bluetooth v4.0 with low-energy technology. The industry expects Bluetooth Smart devices, which operate for months or years on small, coin-sized batteries, to proliferate in the areas of health care, sports, security and home entertainment.

I wouldn't go that far. I still think indoor GPS presents an interesting opportunity for CSR, giving them for an opportunity to sell its own standalone GPS chip (with indoor GPS capability) into mobile handset market.
The standalone GPS chip market is alive and well, when you look at the IHS iSuppli's market forecast.

Re- indoor location not being useful... who uses information desks? People over 50. If you have an app or map of your store on your phone, and can do a direct search for "product X" and even get directions, why would you go to a map or information desk?
I know whenever I go anywhere new with friends, they all have their phone maps out, even when there are easier ways available.

Couple of comments.
1. Even if the the indoor GPS is not gonna be integrated with WLAN/BT/FM combo, Wont they get integrated to the external GPS chip? Since CSR sold out that one, wouldn't it hamper their chances?
2. The value proposition that indoor GPS brings to the average user may be much less than that of the external GPS. When you are in a mall or airport, you always have a information counter or people/mall directory around you. You are never lost basically. So would the user be willing to pay another 10-20 $ for this functionality?
"To assist indoor GPS, CSR designed a back-end network server, featuring self-learning databases. The server collects signals from satellites, cell towers, Wi-Fi nets, sensors and other radios."
As expected, the indoor GPS is not a radio chip in itself, rather it combines signals from various other sources like wifi/gps/cell/nfc/acclerometer using CSR magic algorithm to make a prediction of the location. I feel this could be also done in an MCU integrated into the combo chip or the main application processor, rather than implementing in a separate chip and be more cost effective. And probably google will do a better job at " back-end network server, self-learning databases" etc.
There can be cool applications for indoor GPS like location based deals distribution, whereby if u go near a shop they send in a deal tailored to u. But similar things exist already using only GPS and not a big hit till now.
Inshort I feel CSR has taken a big risk by fully subscribing to its unproven hypothesis of indoor GPS being a big hit. Or they have a plan B?